As TJMaxx Edges Higher, Upside Limited?

After hosting TJMaxx management in New York, Deutsche Bank offered reasons the apparel and home goods retailer can boost sales and earnings.

Among them, core Marmaxx division new stores have been performing better than expected, upcoming system enhancements should lead to better inventory allocations, and efforts to reach a younger demographic seem to be working. In addition, its customers didn't seem to be affected by delays in tax-refund checks in February, unlike other retailers. TJMaxx is expanding its internet business, and is booking related expenses but not sales this year. Any surprise there might give earnings a boost, and the stock's price a boost too.

But the company is expanding in Europe, and with prolonged recession, hopes for sales growth may be over-optimistic.

Shares of TJMaxx (TJX) were trading well ahead of the broader market Friday, up 99 cents, or 2%, to $46.60. The stock is trading near its 52-week high. Deutsche Analyst Mike Baker has a Buy rating and $50 price target on the stock, meaning limited upside of about 7%. Shares pay a 1% yield.

"this could be the explanation of the different comp performance in February. We also believe the home goods category is doing better for TJX relative to ROST, who mentioned this as a weaker category on its 4Q12 call while TJX called it out as stronger."

Barrons.com said Thursday that discount clothing retailer Ross could move higher on the strength of its supplier relationships, including those with department store, and recent successes with teen apparel. (See Barron's Take, "Ross Stores, A Good Fit For Investors." Subscription required)

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